This is the Cato Daily Podcast for Thursday September 6th, 2007.

I'm Caleb Brown.

Government failure in Peru demands private solutions.

So says Ian Vasquez, the director of the Cato Institute's Center for Global Liberty and Prosperity.

The private sector brings Peruvians electricity, telephone service, and internet access.

The public sector's responsibilities, water and education have been longstanding demonstrable failures.

Vasquez says even poor Peruvian families are now sending their children to four figures. loses 40% of its water through leaky pipes and other losses.

As a business person, if you lost 40% of your inventory on a regular basis, you would be out of business

pretty quickly.

How is that kind of inefficiency sustainable when you have people without

adequate water and sewage service for more than a decade, both politically and

just practically? Well of course, it's not sustainable.

And so the government loses money and there aren't actual incentives politically for the government

to actually meet the needs of the people.

And one of the reasons is that the water monopoly in Lima, Peru is controlled very tightly

by the labor union in the water sector.

And so any calls for changes there met with stiff political resistance.

It's the old story of concentrated benefits and diffused costs. So this is a problem with a lot of public sector services in

Peru and in much of the developing world inefficiencies and the lack of feedback mechanisms that exist in the market.

So what they've done in this case is essentially take a service out of the market and put it into the public sector and because Peru has such

dysfunctional government, the services that follow are terrible and don't compare to those that

exist in rich countries.

...